Cambodia's Stock Exchange Has Second Listing, Two Years After the First
Shares of Grand Twins, a Garment Maker, Fall in Trading Debut
A second company listed its shares on
Cambodia's fledgling exchange, two years after the first, but the
stock's weak performance could hurt growth in an already ailing
securities market.
Brokers believed a
successful listing for Grand Twins International (Cambodia) PLC, a
Taiwanese-owned garment maker that completed a $19.3 million initial
public offering last month, would help the stock market to grow.
Instead, the shares lost value on their trading debut.
Grand
Twins' poor performance, analysts say, could set back the government's
plans to build up its stock market. Many Cambodians have dismissed the
effort as a vanity project in an underdeveloped economy that is still
grappling with rural poverty and fragile industrialization.
Grand Twins' share price closed at 9,220 Cambodian riel ($2.28) on Monday, down 5% from an opening price of 9,700 riel and 4.4% lower than its IPO price of 9,640 riel. Only 3,101 Grand Twins shares—worth about $7,382 combined—changed hands in the 3½ hours that the market was open, according to the Cambodia Securities Exchange.
The garment maker, which has factories in Cambodia that produce apparel mainly for German sportswear giant
Adidas AG
ADS.XE -0.04%
, sold all 8 million shares— 20% of the company—offered in the
IPO. But lackluster demand forced the company to price its deal at $2.41
a share, below the midpoint of an initial range of $1.85 to $3.50 Grand
Twins had indicated the stock might sell for.
Analysts
and investors say Grand Twins' poor showing stemmed from concerns over
Cambodia's garment industry, which is the country's largest export
business and formal-sector employer. In the past year, the industry has
faced labor unrest and rising wage costs.
"This
is an odd time to float a foreign-owned Cambodian garment manufacturer,
just six months after labor strikes were suppressed with force," said
Douglas Clayton,
chief executive of Leopard Capital, a private-equity firm that
invests in frontier markets. "This industry doesn't have permanent roots
in Cambodia's economy and can move out with little warning."
Grand
Twins' IPO underwriter, however, played down the significance of the
stock's weak debut. "There's a lack of confidence in the market right
now, but this can be turned around," said
Stephen Hsu,
chief executive of Phnom Penh Securities. "Technical issues, such
as a lack of liquidity and gaps in securities regulations, need time to
be resolved."
Executives at the
Cambodia Securities Exchange and the Securities and Exchange Commission
of Cambodia didn't respond to requests for comment.
Cambodia's
stock market has suffered declining investor interest and trading
volumes since its first listing in April 2012, the $20 million flotation
of the state-owned Phnom Penh Water Supply Authority.
The
authority's share price jumped 63% in its first week of trading, but
foundered in the following months. So far this year, the stock has gone
untraded in 37 sessions and lost 10% of its value. It closed Monday flat
at 4,800 riel, well below its IPO price of 6,300 riel.
Since
the water supply authority's debut, other IPO candidates have either
struggled to meet regulatory requirements or decided to hold off until
the market gains depth and liquidity, industry executives say.
Grand
Twins, for instance, had considered listing since as early as 2012, but
delayed its plans over compliance issues and concerns about market
liquidity.
"Liquidity begets liquidity,
and the lack of liquidity is going to scare off some investors," said
Stephen Higgins,
a Phnom Penh-based businessman and former chief executive of ANZ
Royal Bank, the Cambodian arm of Australia & New Zealand Banking
Group Ltd. "It's a real chicken-and-egg situation, and until they can
get quite a few more stocks listed, it is going to be hard to get that
liquidity."
Some state-owned companies
are preparing potential listings, but it is another Taiwanese-owned
garment maker, TY Fashion Co., that appears most likely to become the
third stock to list on the Cambodian exchange, according to Mr. Hsu of
Phnom Penh Securities. That IPO could raise up to $20 million and be
launched as early as September, he said.
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